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Old 09-20-2014, 12:28 PM
 
23 posts, read 27,661 times
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Hello all,

I would think that it's best to be debt-free when you plan to buy a condo but most people tell me that a lender would prefer to see some kind of debt to show that I am a good payer I am confused!

If you pay your credit card balance at the end of the month, doesn't that show that you are a good payer???

I currently have some debt to pay off ($10,000) that i had planned to pay off before buying, but would it wiser to keep some of it?

My credit score is 754, and I am saving up for a 5% conventional loan.

Thanks for your help!
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Old 09-20-2014, 01:38 PM
 
3,638 posts, read 7,906,152 times
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You will see replies that support all possible answers to that question, mostly from people whose mortgage experience is limited to the 1-3 that they personally have had in their lives.

Of the 15,000 or so that I have seen, your credit score is good, and is supported by Active Tradelines that are in your name (not "Authorized User" accounts.)

Predicated on qualifying in the other areas that are evaluated, banks do not "care" if you pay the whole thing off, or make the minimum payment. They care if you are delinquent, have a history of delinquency, they care about Payment Shock (Prospective new total home payment vs. existing), and they care about your income (qualifying amounts, stability, likelihood of continuance.)

Regarding the card, is it an AMEX, ie., is the total due every month? Or is it a simple revolving account, which you could "run up," but you choose to pay it off every month? This matters in that it will affect the minimum payment that the lender uses in your Monthly Liabilities, hence affecting your overall debt-to-income ratio, albeit perhaps negligibly.

About being debt free: banks don't care if you have MILLIONS in monthly debt, as long as you can document income to cover it, and the prospective new payment, in accordance with Guidelines. Period.
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Old 09-20-2014, 02:07 PM
 
23 posts, read 27,661 times
Reputation: 10
All my credit cards accounts are revolving accounts, and this my preference to try pay it off at the end of the month. However, because of a 6-month unemployment period, I had to use more my credit cards.

My debt-to-income ratio is pretty good I guess: 22%.

So I guess I am gonna focus on saving up for the down payment instead of worrying too much about my debt!!!!
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Old 09-20-2014, 02:31 PM
 
3,638 posts, read 7,906,152 times
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Yes. I was a little harsh in my first reply because - effit, gloves off. You are well-positioned, and it seems as though your comfort zone will drive the bus as much as lenders' constraints.
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Old 09-20-2014, 05:36 PM
 
19,585 posts, read 21,589,882 times
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Quote:
Originally Posted by Pfhtex View Post
Yes. I was a little harsh in my first reply because - effit, gloves off. You are well-positioned, and it seems as though your comfort zone will drive the bus as much as lenders' constraints.


I didn't see it as harsh. You're right banks look at numbers. As long as the numbers all fall in the right boxes they are satisfied. My personal preference is to have little or no debt. But that's me.
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Old 09-20-2014, 07:36 PM
 
23 posts, read 27,661 times
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Quote:
Originally Posted by Electrician4you View Post
I didn't see it as harsh. You're right banks look at numbers. As long as the numbers all fall in the right boxes they are satisfied. My personal preference is to have little or no debt. But that's me.
I agree. I didn't find it harsh neither. I like when people tell me what they think! So thanks for your opinion...
I also like to have no or little debt but I don't want that my preferences prevent me to buy my condo.

Thanks!
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Old 09-20-2014, 08:18 PM
 
19,585 posts, read 21,589,882 times
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Quote:
Originally Posted by chrisl1208 View Post
I agree. I didn't find it harsh neither. I like when people tell me what they think! So thanks for your opinion...
I also like to have no or little debt but I don't want that my preferences prevent me to buy my condo.

Thanks!


Debt isn't bad in itself. Even I can't go completely debt free because it's not smart. For example if I pay off my house and I lose my interest deduction I pay 2k more a year in taxes. So some debt isn't bad. But as long as you don't get in over your head buying a house and having SOME debt isn't bad. It's when your debt outpaces your income it's when its bad
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Old 09-21-2014, 07:07 PM
 
23 posts, read 27,661 times
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Quote:
Originally Posted by Electrician4you View Post
Debt isn't bad in itself. Even I can't go completely debt free because it's not smart. For example if I pay off my house and I lose my interest deduction I pay 2k more a year in taxes. So some debt isn't bad. But as long as you don't get in over your head buying a house and having SOME debt isn't bad. It's when your debt outpaces your income it's when its bad
Got it! I will definitely stop worrying about my debt and focus on my down payment! Thanks

I have been only 13 months in the same job so it leaves me 11 months to save up as much as I can.


Thanks so much!
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Old 09-21-2014, 07:21 PM
 
Location: deep woods
404 posts, read 704,973 times
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Regarding OPs original question, my question for the MOs here is:
What is your advice regarding the possibilities of a 5% dp loan for most condo complexes currently?
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Old 09-22-2014, 08:30 AM
 
4,539 posts, read 5,003,558 times
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Quote:
Originally Posted by gv28 View Post
Regarding OPs original question, my question for the MOs here is:
What is your advice regarding the possibilities of a 5% dp loan for most condo complexes currently?
Only Fannie/Freddie eligible condos are eligible for a 5% downpayment.
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